Broker Check

Progress of Economic Reopening

August 03, 2020

Individual states have all begun to reopen to some degree or the after the coronavirus thrust the country into lockdown starting in March. Nothing moves in a straight line, so now some states are pausing plans to re-open and a few are reversing amid rising case counts. Several are re-imposing restrictions they had lifted earlier — and Arizona is a perfect example of that.

As we have repeatedly mentioned in previous posts, the progress of economic reopening is DRASTICALLY behind the resurgence of the stock market.  Of course, much of the bond and stock market rebound is due to “stimulus” from the Federal Reserve and Congress. More of the rebound may be due to expectations of vaccination research which is now going on at a breakneck pace. We hope to see green shoots in the economy, but so far, the numbers aside from a few tech company earnings has been pretty tepid. Our opinion is that the economic recovery will come faster if government gets out of the way…

Part of our issue with government making so many decisions is that they are making them with flawed data. We certainly do not view our weekly post as a pollical platform to spread our agenda on one side or another. But we do watch government actions and do our best to assess how that may affect the investing landscape.  When you look at the data on which Federal, State and Municipal governments are basing decisions, you do not have to be a mathematician to be suspicious. Here is an example. Reports of the death rate of the covid-19 virus vary DRASTICALLY from state to state. Connecticut is reporting an 8.9% death rate while Utah is reporting .76% (numbers from the CDC.) Is the information telling us that it is ALMOST TWELVE TIMES as dangerous to get the virus in Connecticut as it is in Utah??? Not surprisingly, one governor is a Democrat and the other is Republican. We have no delusions that the governors of states have perfect control of the data that is being dispensed regarding the virus. But when you aggregate the information across the country, Democratic governorship states are reporting almost exactly twice (4.4%) the death rate from those contracting the virus (cases) as the states with a Republican governor (2.2% death rate.) That is not just a statistical anomaly. That represents some fudged data – we just don’t know who is doing it. We are confident that the Covid-19 virus does not have a political affiliation. On top of that there are many anecdotal testimonies to how faulty the reporting of cases and deaths are – but we don’t base our opinions solely on those…

The good news for most of us reading this post – is of all states that have been labeled recent “hot spots” of the virus, Arizona – at least from the data the ADHS is providing – appears to be well past the worst of it. Take a look…

In the meantime, the stock market isn’t backing down. It appears to be looking past the virus and may be heading higher before concerns of the election volatility start taking front stage. All the usual acronyms are coming out in the financial news media. The FOMO (Fear of Missing Out) trade is in full force. Also because of interest rates being pinned to microscopic levels the TINA (There Is No Alternative) trade is being implemented and recently we caught wind of the YOLO trade – or You Only Live Once. So, the markets are telling us it is “risk on” for the near term. If there is a vaccine that shows legitimate promise that comes out in the anytime soon, we are confident that markets would add another leg higher as well. 

Regards and good investing,

Greyson Geiler